Blog

06/12/17

Risk Management

We are in a series exploring the idea of a single payer healthcare system. Click here to find the prior posts.

We recently completed a competitive process with several commercial banks related to the refinancing of our senior debt. While it is so fun to be courted by the ‘relationship’ folks (calling them sales reps is offensive) in nice suits who are always quick to pay for the coffee, you are quickly reminded that the real power in a bank resides with the mysterious ‘credit officer.’ No one has ever seen one of these animals in the wild or bumped into one at the grocery store, but if you’ve ever done a big bank loan, you know that part of the Dodd-Frank law requires the phrase ‘Credit Officer’ to only be spoken in hushed, reverent tones.

Hey, I get it. The bank is thinking about giving your company a boat load of their money and the ‘relationship team’ is motivated and rewarded for bringing in deals. Like all sales people (yes, you know you really are – embrace it), grown up supervision is required because of this thing called ‘risk.’ Banks don’t build big buildings without worrying about risk.

And here is what you learn when you go through this process: While there are lots of nuances in the proposals, the bank is going to put you a headlock to make sure you, the owner, are just as worried about managing that risk as that paranoid credit officer (yes, redundant). And they’ve done a lot more of these deals than you have, so when you read their documents, you’ll realize they figured out how to lock all the back doors, in case you might ever consider sneaking out. That’s the deal…we’ll give you our cash and you’re going to color inside the lines until we get paid back.

Well, the Medicare Advantage (MA) world works in a similar way, sort of. The carriers get a defined payment for each beneficiary from Medicare and now they have the financial risk.

Well, Dear Patient who elects to sign up for our MA plan, we, the insurer, are going to be on the hook to pay for all of your healthcare with just this defined payment Medicare gave us and the bit you chip in for premiums and co-insurance. Isn’t that big of us? But you’re going to help us manage this risk, aren’t you? Yes, yes you are.

You see, about two-thirds of the people currently in an MA plan get their care delivered through an HMO. Yep, gatekeeper primary physician…specific care protocols…referrals required…defined network of specialists and facilities…that type of HMO. Another 30% are in a PPO, but not the PPO of the 1970’s. Defined networks that you might call ‘narrow,’ with big penalties for going outside of the network to get care.

So, if you don’t like any restrictions on where you get your care, you probably won’t like the single payer idea of ‘Medicare Advantage for everyone.’